Compete to Thrive

Every grocery retailer is currently in a race to sell more groceries to more people. Convenience is paramount—from grab-n-go meals to quick checkouts and in-and-out parking. Prices have to be good or people will balk and go somewhere else. As cooperative businesses know, that’s just the beginning. Fulfilling a mission to the community, being good neighbors, and working in tandem with staff to meet owner needs is part of the service equation. It’s not only about food, but being a resource to people and providing a sense of belonging for those seeking it.

“It takes a lot to keep your feet on the ground,” said Jeanie Wells, operations, expansions and startups consultant. “Shoppers can literally go down the road to get the same things most co-ops sell. It’s been a big shift.”

What used to be considered “co-op” food or natural foods territory has been upended and encroached on by very disruptive operators capitalizing on an avid desire for high-value health-conscious choices. Similarly the demands of budget consumers, who represent a strong segment in the industry, also expect clean modern stores, friendly faces, and inexpensive fresh food. Everyone, it seems, wants their cake and to eat it, too.

It’s easy to be overwhelmed in a supercharged environment. What are the smart investments? How do you acclimate people to the pace of change in the industry? A lot of people are scrambling to keep up. Staying on your game requires focus.

Focus on Specific Goals

If there’s one truism that will never go away, it’s that you can’t do it all. Wells suggested adopting a dual-mind frame—do what you need to do to be competitive—and do what you need to do to differentiate. Focus on what efforts will offer the highest return on investment and consistently apply them to yield results.

“You have to have both of those conversations,” Wells said. “You will lose basket size and customer count if you don’t think about both competition and differentiation.” For example, your produce and meat departments may be strong differentiators, and most of your promotion muscle is behind local and high-quality food, but that doesn’t mean those departments shouldn’t be competitive in attracting new customers.

She suggested evaluating your competition and how you stack up: what do you absolutely have to do to remain competitive? That might be some product or service or piece of equipment that helps the retail stay on the cutting edge. However, she said the number one area for retailers to consider focusing their competitive strategies on is improving price image.

“If there are ten places selling the same food, you have to compete on price,” Wells said. Co-ops often do have good prices on natural foods, even better than their conventional competitors, but their price image is terrible. Shoppers’ perception is that the co-op’s prices will always be higher. Part of it is historical inattention to price, or a discomfort with it, and the other is that co-ops are not aggressively promoting deals and directly addressing price image with their customers. Retailers need to set target goals for pricing, sales and promotions that change those ingrained perceptions.

“It’s really a matter of focus,” Wells said. Co-ops need to figure out what they’re best at, determine their economic driver, and what they have a passion for. Do the thoughtful work ahead of time. Answer the questions like what’s your best chance at getting more people to come to the co-op for lunch, or groceries. “It’s a process retailers have to go through,” she said, “and there are lots of tools out there that help.”

Customer-Driven Actions

Co-ops are proud that they have long-term relationships with their customers and owners, but loyalties can change, and values can be the first to go when the siren call of cheap prices lures people away. It’s important to take a good look at what the co-op is doing to intentionally maintain those relationships that keep people coming back.

Currently, it’s critically important to reward customers for their loyalty. “You have to show the shoppers that you are working hard to bring them good products and good values and you will continue to earn their business,” Wells said. Not only that, people like to feel nurtured and important, and that their choice to shop at the co-op is celebrated. The desire to belong is strong in human beings, and co-ops also have an opportunity to extend that sense of belonging and inclusion in their communities as a point of differentiation. Co-op retailers need to focus on the customer in these key ways:

Understand their needs (surveys, assessments, listening)

Engage with them in-store (merchandising, demos)

Share the experience (outreach, community events)

It’s also the key to being competitive and building sales.

“It’s easier to raise the basket size than the customer count,” Wells said. “These are people already in the store, and you need to meet their needs more fully.” She said this requires continued analysis of what people want by reviewing product movement, trends and refining the product mix and giving it to them.

For example, if sales of salad dressing are shrinking but you are dedicating too much shelf space to it, you are probably losing customers seeking other things. “You need to create a process and systems for doing that work in the organization to raise basket size,” she said. Wells also said assessment tools, like surveys and analyzing purchasing patterns can give retailers good insights. That isn’t all there is to growth, however, customer count is also important and requires steady effective outreach to attract new shoppers.

Communicating Values

Cooperatives are not in business solely for the sake of selling stuff. They are in it to be a marketplace alternative, where fairness is the guidepost. The co-op is mission-driven to serve people and communities, not maximize profits. Yet achieving reasonable profitability is essential. Socially-responsible businesses must also strike a balance in meeting the needs of customers and expressing its core values.

Not all of those things are in harmony at any given time. The grocery industry is predicated on volume and cheap labor and ingredients. For mission-driven companies, this presents unique challenges, especially for food co-ops meeting the needs of a diverse customer base. There is no such thing as the “average” customer anymore: they range from all-natural-at-all-cost, to budget-conscious patrons who want variety and a good deal.

Leslie Watson is a board leadership development consultant who finds the values-driven service model of co-ops their great strength and one of their biggest challenges. For board members governing co-ops today, rising to these challenges is imperative. That’s why Watson thinks it is helpful for boards to understand to a certain level of competency about the grocery industry, and how to effectively engage with and communicate to owners the reasons for their decisions.

“There’s an increasing need for more education for boards and owners because the business environment is so demanding,” Watson said. She thinks that people need to have enough information to understand the environment and be equipped to ask good questions. “Boards need to understand it because the co-op is a community food system that boards need to make good decisions for in their leadership role.”

“When we think about our ability to compete and differentiate, we need to think about to what end,” she said. “Boards and owners need to be advocates for decisions that will help us sustain our business and deliver on our values. We compete to grow and deliver on a promise to our communities because we care.”

About CDS Consulting Co-op

CDS Consulting Co-op is a cooperative of consultants working together to support our clients' success in meeting their goals. We help clients develop the insight, skills and resources they need to make a positive impact in their communities as successful businesses and meaningful cooperatives.